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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Grommit who wrote (7272)	5/21/1999 3:25:00 PM
From: Michael Burry	Respond to of 78478

Grommitt, re: SVR, no doubt, there are some favorable goings on. I'd say my Pick of the Month article was too bullish, and my post here was purposely more bearish to kind of counteract that. The demographics are favorable, no doubt. Remember that the bulk of their revenues are sales. If this is going to continue growing, they need capital. They get it by borrowing against the unpaid principal (AR) at a fraction of that unpaid principal. This inhibits growth in the growth rate, and basically guarantees slowing growth. Last year they threw in a lot of addiitonal debt to give sales a kick, but at a higher interest rate. They cover their interest expense with interest earned, but obviously that won't continue if they pile on debt like that every year. This is NOT really a growth story, no matter the demographics, because the model can't support it as is.. But it is nevertheless a wonderful valuation puzzle, and possibly a value stock. Re: liquidation, evidently at least one analyst thinks that that value is over 13/share. But will it be liquidated? Depends entirely on Mr. Mead, no? If not, then liquidation should be ignored and it has to be valued as an ongoing concern. Interesting case. Further discussion could be on your Timeshare thread. Mike